Breaking News: Gucci buys stake in Sowind Group (GP & JR)

On April 25th we reported that another independent watchmaker was taken over by a big luxury group (LVMH bought Hublot). Today we report the purchase of 23% of the Sowind Group (Girrard Perregaux and Jean Richard) by Gucci Group (owned by PPR).

Please share your opinion about this fact. Is it a positive or negative move by an independent watch manufacturer? And will the other independent watch manufacturers be ‘tempted’ to sell their companies as a result of the huge sums of money offered by the big luxury firms?

Here follows the official press release by PPR:

“PPR and Girard-Perregaux sign a long-term strategic partnership.

PPR announced the signature of a long-term strategic partnership with the Sowind Group, a Swiss holding company based in La Chaux de Fonds headed by Luigi Macaluso. The Sowind Group includes the Haute Horlogerie brands Girard-Perregaux and JeanRichard, a Research and Development Centre, as well as Sowind Manufacture, maker of high-end watch movements. Under the partnership, PPR will own a 23% interest in the Sowind Group, with the possibility of increasing its stake under the terms of a shareholders’ agreement. Mr. Macaluso will retain control of the company.

This strategic partnership represents the materialisation of a shared vision between the two partners regarding long-term growth prospects in the Haute Horlogerie segment. It will allow PPR and Girard-Perregaux to combine their know-how and knowledge base in terms of R&D, design, brand management, distribution networks and sourcing. Mr Macaluso will join the Gucci Group Management Committee and the Boucheron Board of Directors. François-Henri Pinault and Robert Polet will become Directors on the Sowind Board.

This long-term agreement offers Girard-Perregaux, one of the last independent, high-end Swiss watch “Manufactures”, and the JeanRichard brand the means to fully exploit their potential for growth and innovation by teaming up with one of the major players in the luxury goods industry. As for PPR, the agreement confirms the Gucci Group’s goal of building a strong presence in the Haute Horlogerie segment, one of the most promising luxury goods markets. The Gucci Group brands will thus benefit from outstanding watch-making expertise and will extend their sourcing for timepiece components.

François-Henri Pinault, Chairman and CEO of PPR, declared: “I am pleased that the bonds between our two groups are being strengthened, as we build a joint future in one of the most prestigious sectors of the luxury goods business. The PPR and Sowind groups share the same entrepreneurial values passed on through long family tradition. I have a great admiration for Girard-Perregaux, a brand founded in 1791 whose identity and worldwide influence is exceptional.”

Luigi Macaluso, Chairman and CEO of the Sowind Group, stated: “I am extremely pleased to be able to work with a major group like PPR and, specifically, with the Gucci Group. This will be a truly rewarding experience. Our varied and complementary skills are based on common values of excellence. This agreement will mean new synergies and new long-term projects.”

Robert Polet, Gucci Group CEO, said: “This is a tremendous opportunity for our brands to be in contact with the greatest watch-making expertise of Sowind. We are convinced that this

agreement will create a number of important synergies for our watch brands and their further development.”

About PPR

PPR develops a portfolio of high-growth global brands. Through its Consumer and Luxury brands, PPR generated sales of EUR 19.8 billion in 2007. The Group is present in 90 countries with approximately 93,000 employees. PPR shares are listed on Euronext Paris (# 121485, PRTP.PA, PPFP).

The Sowind Group is a Swiss « Haute Horlogerie » company owned by Luigi Macaluso who has been heading it since 1992.

Based in La Chaux-de-Fonds, the Group incorporates the Girard-Perregaux and JeanRichard brands, a watch « Manufacture » that develops and produces a complete portfolio of high-end movements (more than 100 variations) and collections of mechanical watches.

The Research and Development Centre is the company’s cornerstone, with more than 80 patents and a strong percentage of the firm’s turnover being re-invested in it.

Girard-Perregaux’s roots date back to 1791 and the company history is rich in innovations bringing together design and technology, like the renown Tourbillon with three gold bridges created by Constant Girard in the 19th century.

Girard-Perregaux is represented globally in 550 prestigious points of sale and several exclusive boutiques, like the one in Gstaad.

JeanRichard is a brand dedicated to Daniel JeanRichard (a pioneer of watchmaking in the Neuchatel region during the 17th century) and presents a daring and innovative interpretation of the codes of traditional Swiss watchmaking.

Key Figures:

§ 350 employees

§ An annual production of around 20 000 units

§ Watches with prices ranging from around 6 000 to 500 000 Euros

§ Two unique museums: the Girard-Perregaux museum in Villa Marguerite and the museum dedicated to watchmaking tools and machinery in the Villa JeanRichard.”

This scares me. Although not based on facts or whatsoever, it sounds like cashing :)

Will the beautiful GP and JR watches transform into luxury fashion watches like Nataf did with the once wonderful Zenith brand? I hope not.

On the other hand, besides for the shareholders of GP and JR, this might be a positive move for these brands because they have new funding to enhance their current line of watches and for new innovations.

@RJ: I am also in doubt. On the one hand, I see it as a positive thing: Sowind sold less than a quarter and that gives them indeed a possibility to invest in new movements.

But on the other hand, they write that PPR has to possibility to purchase the rest of the stocks. That means they will loose their freedom. And I do not believe we will see more spectacualr movements like the Three Bridge Tourbillon or Jackpot Movements… Gucci is in the end a cash making machine and will want to see fast ROI!

Time will tell… In any case, this shows how ‘hot’ watchmaking is… Now the youth needs to realize this and become a watchmaker ;) We have enough people on Wall Street, Canary Warf and Fleet Street!

This should mean a positive move and change for the better. GP has been known for a lack of wise distribution having been supplying gray market dealers. So hopefully for the benefit of the company they will put an end to such a damaging practice. Also GUCCI group will definitely help get a better recognition for a GP and JR watches that are otherwise are only known to a small circle of watch enthusiast. There is a strong believe that they will be able to sell watches in higher quantities. Cheers from NYC.

I prefer to buy watches from independent companies like Audemars, Patek, Ulysse, Breitling and GP in the past. I regret that independent companies disapear and I support them buying their products insted of others.